News articles report that Super Micro Computer stock (NASDAQ: SMCI) was facing the possibility of being delisted from the Nasdaq before hiring a new firm of auditors and presenting a plan to file its Annual Report in early 2025. Investors may have legal claims arising from the circumstances leading to this near-delisting, which reportedly include related party transactions that were not fully disclosed in the Company’s publicly reported financials.
Super Micro Computer is a $35 billion high-performance server and storage solutions manufacturer founded in 1993 and headquartered in San Jose, California, in the heart of Silicon Valley. The company originally listed on Nasdaq via a $64 million Initial Public Offering in 2007. Super Micro Computer shares have significantly dropped in value in recent months, although they have recently rebounded to some extent. The Company’s shares peaked in value at $122.90 a share in March 2024 and have since traded at prices as low as below $20 a share.
Super Micro Computer is reportedly a “Rack-Scale Total IT Solutions provider”, offering servers, storage systems, switches, software and global support services. It sells into the following segments: enterprise data centers, cloud computing, artificial intelligence, 5G, and edge computing. Servers and storage systems reportedly accounted for 92% of the company’s net sales in 2023.
Super Micro Computer faced a November 16th deadline to either file its delayed 10-K Annual Report or submit a plan with the Securities and Exchange Commission (“SEC”) to regain compliance (which it has now reportedly submitted). Super Micro Computer had to retain new auditors after Ernst & Young resigned as its accountant in October, citing its disagreement with the wording of certain disclosures in the Company’s public SEC filings.
Super Micro Computer was previously delisted back in 2018, when it was removed from the Nasdaq after an SEC investigation into its revenue recognition practices. The Company’s shares were later relisted after a settlement with the SEC. When shares are delisted, investors still hold their stock, but trading moves to over-the-counter (“OTC”) trading in the so-called “Pink Sheets”- a term left over from the days when stock trades and prices were reported on actual sheets of paper. OTC or “Pink Sheets” stocks trade in a market that generally provides less liquidity than Nasdaq, and the regulations governing OTC markets are less strict than those on major exchanges. This lower regulatory threshold can translate into even less transparency for investors.
The most recent issues for Super Micro Computer coincided with public allegations by an independent investment research firm known as Hindenburg Research (“Hindenburg”). Hindenburg publicly alleged that its investigation purportedly revealed ”glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.” This blog has not independently verified the foregoing allegations and is merely quoting them from a publicly-available article on Hindenburg’s website. Also, Hindenburg alleged that [a]ccording to a lawsuit filed in April 2024, Super Micro waited only 3 months after the SEC settlement before restarting ‘improper revenue recognition,’ ‘recognizing incomplete sales,’ and ‘circumvention of internal accounting controls’”.
Investors who wish to discuss a possible claim may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. The firm has handled numerous cases involving securities and commodities, both in state and federal court and in arbitration. Attorneys at the firm are admitted in New York, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states when required by applicable rules).
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